Bitcoin has shot up in price over the last few days, reaching a six-month high of £8,685 ($11,188).
The cryptocurrency’s value had been fairly steady since recovering from the coronavirus lockdown in May, when it was fluctuating around £7,500 ($9,700).
It started rising on Thursday, before shooting up on Sunday and Monday, prompting people to consider buying or selling.
Why did Bitcoin’s price rise?
There are not always clear reasons for why Bitcoin’s price goes up or down. The crash in March was directly tied to the Covid-19 pandemic, but it is not always obvious what is behind fluctuations in value.
This rise is likely tied to the news that US banks are considering allowing customers to hold digital currencies such as Bitcoin, adding an extra level of security.
Bitcoin analyst Gary McFarlane told The Sun: “Surprise news from the US that banks will be allowed to provide custody services for Bitcoin and other cryptocurrencies has lit a fire under the price of the virtual currency.”
The infrastructure around Bitcoin is improving, making it easier to use, which could also partly explain the rise.
There is also a decreased supply of Bitcoin in circulation, making the existing currency more valuable.
Are these higher prices here to stay?
According to experts it is not necessarily time to get excited just yet.
Gavin Smith, chief executive of bitcoin and crypto consortium Panxora, told Forbes: “Our view for the balance of 2020 is still high volatility with a year end of around $7,000, with a drive higher to new highs in 2021.
“Our view is that we still believe the markets are pulled on the one hand by the inflation hedge story driving Bitcoin higher while at the same time the global economy is suffering a massive demand shock with the potential to drive Bitcoin lower.”
The possibility of a second wave of coronavirus adds to Bitcoin’s volatility, with another price crash likely if countries have to go back into lockdown.
What is Bitcoin?
Bitcoin is a digital currency which is traded between people without the help of a bank.
The currency is created by digitally mining, and transactions are stored on the blockchain.
You can store Bitcoin in a digital wallet app, either on your phone or on a computer. Transactions can be made anonymously, making Bitcoin and other cryptocurrency popular for criminal activity.
However, its use is becoming more mainstream, with some experts believing it to be the currency of the future.